Travelers Indem. Co. v. Rubin, 13027

• Decision Date: 27 December 1988
• Docket Number: No. 13027,13027
• Citation: 551 A.2d 1220,209 Conn. 437
• Court: Connecticut Supreme Court
• Parties: TRAVELERS INDEMNITY COMPANY v. John RUBIN et al.

Page 1220

551 A.2d 1220

209 Conn. 437

TRAVELERS INDEMNITY COMPANY v. John RUBIN et al.

No. 13027.

Supreme Court of Connecticut.

Argued Oct. 12, 1988.

Decided Dec. 27, 1988.

Robert C. Danaher, Hartford, for appellant (plaintiff).

Alexandra Davis, with whom, on the brief, was Richard S. Cramer, Hartford, for appellees (defendants).

Before PETERS, C.J., and CALLAHAN, GLASS, COVELLO and HULL, JJ.

GLASS, Associate Justice.

The plaintiff, Travelers Indemnity Company, instituted this action to set aside a conveyance of real property owned by the defendant John Rubin ¹ to the defendant Linda Paul. The trial court rendered judgment in favor of the defendants. We find no error in that portion of the judgment in favor of Paul; there is error in that portion of the judgment in favor of Rubin, and as to him the judgment is set aside and remanded to the trial court for further proceedings.

The facts may be summarized as follows. In 1975, the plaintiff provided Rubin with insurance coverage on the Hofbrau Restaurant, which Rubin owned. To collect under the policy, Rubin vandalized the restaurant on April 28, 1975, and submitted a claim, which the plaintiff paid. The plaintiff, however, discovered the fraud and brought suit against Rubin on July 30, 1980. On May 14, 1984, the plaintiff was awarded a judgment in the amount of $236,968.78 against Rubin. This action is based on the plaintiff's effort to satisfy this judgment.

The property that is the subject of this action is located on Birch Mountain Road in Manchester. In 1974, Rubin and his wife at the time, Joan, purchased the property and executed a first mortgage to the Savings Bank of Manchester. Thereafter Rubin engaged in an elaborate series of transactions involving the property. On July 13, 1975, the Rubins gave a second mortgage to Northeast Financial Services, Inc., in exchange for a $10,000 loan. In that transaction, both parties were represented by Rubin's attorney, Jacob Sobotka. Rubin also gave a third mortgage in the amount of $10,000 on the property to his mother, Rachel Green. The third mortgage was designed to act as a buffer between the second mortgage and encumbrances Rubin expected to be placed on the property. Rubin's creditors subsequently placed encumbrances on the property.

Upon their divorce in 1976, Rubin's wife Joan quit-claimed all her interest in the property to Rubin. Rubin met the defendant Paul in 1972. In 1975, they became romantically involved, and began living together the following year. The couple ultimately married in 1980. In 1977, a fire destroyed the house on the Birch Mountain Road property, and Rubin used the insurance proceeds to pay off the first mortgage. The second mortgage, held by Northeast Financial Services, Inc., was transferred to Mark and Bernice Sobotka, the parents of Rubin's attorney. The Sobotkas then instituted a foreclosure action. Their son engaged an appraiser and hired the law firm of Brody & Jump to handle the foreclosure. When the property was strictly foreclosed, attorney Sobotka directed transfer of title to Paul. On December 27, 1978, Paul executed a mortgage and note to Sobotka as trustee for the foreclosure debt. The house was later rebuilt and on December 19, 1979, Paul obtained a mortgage from Society for Savings in the amount of $35,000, from which attorney Sobotka was paid.

The plaintiff brought this action against Rubin and Paul on January 29, 1985, seeking to set aside the 1978 conveyance of the Birch Mountain Road property, and also seeking compensatory and punitive damages. The plaintiff alleged that Rubin had transferred the property to Paul through the 1978 foreclosure action with the intent of hindering collection of Rubin's anticipated liability arising out of the plaintiff's action, brought in 1980, to recover money paid on Rubin's fraudulent claim under the policy covering his restaurant. The plaintiff also alleged that Paul knowingly participated in and conspired with Rubin in the foreclosure to avoid Rubin's debt.

At trial, Rubin was defaulted for failing to appear. Paul appeared, denying the allegations of the plaintiff's amended complaint, and asserted as a special defense General Statutes § 52-577, ² which establishes a three year limitation period for tort actions. The trial court found that the plaintiff's action was barred by § 52-577, and rendered judgment for both defendants. From this judgment, the plaintiff has appealed, claiming that the trial court erred in: (1) holding that the suit brought by the plaintiff was barred by the three year statute of limitations for tort actions; and (2) rendering judgment for the defendant Rubin who was in default for failing to appear. We find error in part.

I

The plaintiff claims that the trial court erred in holding that this action was barred by the three year statute of limitations for tort actions. Ordinarily, the fraudulent conveyance statute, General Statutes § 52-552, ³ would be the basis for an action to set aside a fraudulent conveyance of real property. A claimant, however, is not a creditor within the contemplation of § 52-552 until an unliquidated claim for damages in tort has been liquidated by a judgment. Murphy v. Dantowitz, 142 Conn. 320, 324, 114 A.2d 194 (1955). Moreover, the plaintiff concedes that its action is a common law action and therefore does not implicate § 52-552.

In addressing the scope of § 52-577, we have stated that "[t]he three-year limitation of § 52-577 is applicable to all actions founded upon a tort which do not fall within those causes of action carved out of § 52-577 and enumerated in § 52-584 or another section. Tuohey v. Martinjak, 119 Conn. 500, 506, 177 A. 721 [1935]." Collens v. New Canaan Water Co., 155 Conn. 477, 491, 234 A.2d 825 (1967). Thus, the three year limitation period of § 52-577 applies to all actions based on a tort unless there has been a specific statutory exclusion. The common law tort action to set aside a fraudulent conveyance of real property has not been statutorily excluded from § 52-577, and we are unpersuaded that we should exclude such actions by judicial fiat.

The plaintiff claims, however, that even if the three year period of limitation in § 52-577 applies to a common law tort action to set aside a fraudulent conveyance, the period did not begin to run until the plaintiff received a judgment on its underlying tort claim. The gist of the plaintiff's argument is that although the Hofbrau Restaurant was vandalized on April 28, 1975, and the plaintiff commenced its action to recover for the fraud on July 30, 1980, the plaintiff did not receive judgment against Rubin until May 14, 1984. Because the present action was instituted on January 29, 1985, the plaintiff avers that it is well within three years of the judgment against Rubin, and, therefore, is not barred by § 52-577. In support of this claim, the plaintiff relies on two Superior Court cases. ⁴ We find neither case persuasive.

In Murphy v. Dantowitz, supra, we recognized that an underlying tort action for damages could be joined in a single complaint with a claim that a fraudulent conveyance made to defeat a debt be set aside. We stated: "Upon common-law principles ... one who at the time a transfer of property is made has a right to recover damages in tort may avoid the transfer as fraudulent if the transfer is made for the purpose of defeating his right. White v. Amenta, 110 Conn. 314, 318, 148 A. 345 [1930]. The plaintiff, under circumstances such as those alleged in the complaint in this case, could incorporate in a single complaint a claim for damages in tort and a petition that a fraudulent conveyance made to defeat her claim be set aside.... See Burakowski v. Grustas, [134 Conn. 205, 208, 56 A.2d 461 (1947) ]; Norwalk Shores Realty Co. v. Clark, 126 Conn. 688, 691, 14 A.2d 34 [1940]; Boiselle v. Rogoff, 126 Conn. 635, 13 A.2d 753 [1940]; Fine v. Moomjian, 114 Conn. 226, 228, 158 A. 241 [1932]." Murphy v. Dantowitz, supra, 142 Conn. at 324-25, 114 A.2d 194.

The plaintiff argues that the joinder of the two actions is permissive and not mandatory. We are not persuaded, however, that a potential judgment creditor who is aware of a fraudulent conveyance should be allowed to toll the statute of limitations by ignoring the conveyance and to wait until the underlying claim is reduced to judgment to pursue the fraud feasor. ⁵ Cf. Rosenberg v. Rosenberg, 123 Ariz. 589, 592, 601 P.2d 589 (1979) (in action to set aside fraudulent conveyance of realty after wife obtained divorce settlement judgment, statute of limitations began to run when wife discovered fraud); Greco v. Pullara, 166 Colo. 465, 467, 444 P.2d 383 (1968) (when no actual notice prior to date plaintiff became judgment creditor, statute of limitations on judgment creditor's action began to run when creditor chargeable with knowledge of fraudulent conveyance); Cowart v. Whitley, 39 N.C.App. 662, 664, 251 S.E.2d 627 (1979) (where plaintiff obtained judgment in 1973 and sued to set aside prior conveyance in 1976, issue was whether plaintiff knew of conveyance prior to 1973 action). Where the claimant is aware of the fraudulent conveyance, he may not treat the joinder of the two actions as optional if failure to join the actions would result in expiration of the limitations period applicable to the conveyance.

In the present case, the trial court found that the plaintiff knew that the property had been foreclosed in 1978 when it instituted the action to recover damages from Rubin for the insurance policy fraud on July 30, 1980. The plaintiff had known of Rubin's residence on Birch Mountain Road since 1975. When the plaintiff discovered in September, 1979, that Rubin's claim under the restaurant policy was fraudulent, it also became aware that the Birch Mountain Road property owned by Rubin had been foreclosed in 1978. It also became aware that Rubin was living on the same premises in 1980.

We can discern no rational reason why a...